REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) M/S SESHASAYEE STEELS P. LTD. Appellant(s) VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI Respondent(s) JUDGMENT R. F. NARIMAN, J. appellant-assessee entered into agreement to sell, on 15.05.1998, with one Vijay Santhi Builders Limited for total sale consideration of Rs.5.5 crores. important clauses of sale agreement are set out hereinbelow: 1. consideration for sale of property shall be Rs. 5,50,000/- (Rupees Five Lakhs Fifty Thousand only) per ground. total area of property to be sold is around 100 grounds and Signature Not Verified total sale consideration of Rs.5,50,00,000/-(Rupees Digitally signed by R NATARAJAN Five Crores Fifty Lakhs only) will be paid directly Date: 2019.12.13 17:45:33 IST Reason: by nominees/members on behalf of PARTY OF SECOND PART or by PARTY OF SECOND PART, whichever is earlier. property shall be free 1 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) of all encumbrances at time of registration. 2. It is agreed that total extent of property is 100 grounds approximately including areas allotted for road and other amenities, plus actual extent available for flats. 12. PARTY OF FIRST PART has already handed over to PARTY OF SECOND PART Xerox copies of all land documents of schedule mentioned property for their legal counsel s scrutiny and opinion. PARTY OF SECOND PART have also satisfied themselves about title deeds. PARTY OF FIRST PART agree to show original title deed which are kept with them to nominees of second part as and when required after fixing prior appointment. 14. Both parties are entitled to specific performance of this agreement. 16. PARTY OF FIRST PART hereby gives permission to PARTY OF SECOND PART to start advertising, selling, construction on land herein mentioned. Advertisements, sales catalogues and leaflets shall be approved by PARTY OF FIRST PART before publication or circulation. SCHEDULE OF PROPERTY Sl. No. Patta No. Village Area in Acres 4 117 Perungudi 2.52 1 117 Perungudi 1.66 320/1 469 Perungudi 1.44 ________ 5.62 Pursuant to this agreement to sell, Power of Attorney was executed on 27.11.1998, by which, assessee appointed one Chandan Kumar, Director of M/s. Vijay Santhi 2 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) Builders Ltd. to execute and join in execution necessary number of sale agreements and/or sale deeds in respect of schedule mentioned property after developing same into flats. Power of Attorney also enabled Builder to present before all competent authorities such documents as were necessary to enable development on property and sale thereof to persons. appellant did not file any Return for Assessment Year 2004-2005. Apparently, it was detected later by Assessing Officer, that agreement to Sell had been entered into and that, subsequently, Memo of Compromise had also been entered into between parties dated 19.07.2003. Based on discovery of this fact, Notice dated 04.11.2008 issued under Section 148 of Income Tax Act, 1961 (hereinafter referred to as I.T. Act for brevity) was served on appellant. Even in response to this notice, no Income Tax Return was filed. notice dated 08.09.2009 was issued under Section 142(1) fixing case for hearing on 20.09.2009. Here again, appellant did not turn-up, as result of which, another notice was issued dated 23.10.2009, but this time again assessee did not turn-up, so third letter was issued on 11.12.2009 fixing case for hearing on 22.12.2009. In response to aforesaid letter, assessee, by letter dated 29.12.2009 stated as follows: - 3 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) I refer to your letter dated 11.12.2009. I request you humbly and sincerely not to pass any order u/s 144 and to give me time for one month from today. I shall positively submit all necessary statements and documents within 30 days of today to your satisfaction. I seek this time only because of my very serious illness after abdominal surgery. Since time bar was foremost in mind of Assessing Officer, limitation falling on this transaction by 31.12.2009, Best Judgment Assessment Order was then passed under Section 144 of I.T. Act dated 31.12.2009. Vide this Order, entire sale consideration was treated as capital gain and brought to tax. appeal was preferred against this Order. Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT (A) for brevity) by Order dated 28.10.2010 examined three documents in question and ultimately dismissed appeal. Income Tax Appellate Tribunal (hereinafter referred to as ITAT for brevity) by Order dated 24.06.2011 agreed with CIT(A) and found that on or about date of agreement to sell, conditions mentioned in Section 2(47)(v) of I.T. Act could not be stated to have been complied with, in that, very fact that compromise deed was entered into on 19.07.2003 would show that obligations under agreement to sell were not carried out in their true letter and spirit. As result of this, Section 53A of Transfer of Property Act, 4 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) 1882, (hereinafter referred to as T.P. Act for brevity) could not possibly be said to be attracted. What was then referred to was Memo of Compromise dated 19.07.2003 under which various amounts had to be paid by Builder to owner so that complete extinguishment of owner s rights in property would then take place. last two payments under compromise deed were contingent upon M/s.Pioneer Homes also being paid off, which apparently was done, as Appellate Tribunal held: Further on specific query from Bench as to whether all cheques as mentioned in compromise deed have been encashed, answer to which was Yes . This further supports that transfer took place during assessment year 2004-05 as last cheque is dated 25.01.2004. High Court, by impugned judgment dated 25.01.2012, adverted to concurrent findings of authorities, and stated that three questions of law that were set out were all answered in favour of Revenue and against assessee. Shri R. V. Easwar, learned senior counsel appearing on behalf of appellant, read to us in copious detail three documents in question. His first argument was that Section 2(47)(v) of I.T. Act was attracted on facts of this case, on reading of agreement to sell together with Power of Attorney. alternative argument was that, assuming that this argument fails, in any case, this 5 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) case would fall within Section 2(47)(vi), as on this date, there could be said to be transaction which has effect of enabling enjoyment of any immovably property . third submission made before us was that, in any event, what is relevant to bringing to tax capital gain in Assessment Year 2004-2005 is whether compromise deed of 19.07.2003, when read, could be said to fall within any of clauses under Section 2(47). According to learned senior counsel, this could not be said to be case, as result of which, in any event, there would be no transfer of capital asset within meaning of Section 2(47), so far as this Assessment Year is concerned. Shri K. Radhkrishnan, learned senior counsel appearing for Revenue, took us through Assessment Order, Order of CIT (A) and ITAT as well as High Court s judgment, and supported these judgments stating that clearly Section 2(47)(v) could not be made out on facts of this case and, therefore, in any case, this appeal should be dismissed. No other point had been argued before forums below, and need not therefore be entertained. Having heard learned counsel for both parties, it is necessary to first set out statutory provisions: Section 2(47) of Income Tax Act, 1961: 2. In this Act, unless context otherwise requires,- 6 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) . . (47) transfer , in relation to capital asset, includes,- . . (v) any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of contract of nature referred to in section 53A of Transfer of Property Act, 1882 1 (4 of 1882 ); or (vi) any transaction (whether by way of becoming member of, or acquiring shares in, co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has effect of transferring, or enabling enjoyment of, any immovable property. Explanation 1.- For purposes of sub- clauses (v) and (vi), "immovable property" shall have same meaning as in clause (d) of section 269UA;] Explanation 2. - For removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from transfer of share or shares of company registered or incorporated outside India;) Section 53A of Transfer of Property Act, 1882: 53A. Part performance. Where any person contracts to transfer for consideration any immoveable 7 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) property by writing signed by him or on his behalf from which terms necessary to constitute transfer can be ascertained with reasonable certainty, and transferee has, in part performance of contract, taken possession of property or any part thereof, or transferee, being already in possession, continues in possession in part performance of contract and has done some act in furtherance of contract, and transferee has performed or is willing to perform his part of contract, then, notwithstanding that where there is instrument of transfer, that transfer has not been completed in manner prescribed therefor by law for time being in force, transferor or any person claiming under him shall be debarred from enforcing against transferee and persons claiming under him any right in respect of property of which transferee has taken or continued in possession, other than right expressly provided by terms of contract: Provided that nothing in this section shall affect rights of transferee for consideration who has no notice of contract or of part performance thereof. In order that provisions of Section 53A of T.P. Act be attracted, first and foremost, transferee must, in part performance of contract, have taken possession of property or any part thereof. Secondly, transferee must have performed or be willing to perform his part of agreement. It is only if these two important conditions, among others, are satisfied that provisions of Section 53A can be said to be attracted on facts of given case. On reading of agreement to sell dated 15.05.1998, what is clear is that both parties are 8 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) entitled to specific performance. (See Clause 14) Clause 16 is crucial, and expression used in Clause 16 is that party of first part hereby gives permission to party of second part to start construction on land. Clause 16 would, therefore, lead to position that license was given to another upon land for purpose of developing land into flats and selling same. Such license cannot be said to be possession within meaning of Section 53A, which is legal concept, and which denotes control over land and not actual physical occupation of land. This being case, Section 53A of T.P. Act cannot possibly be attracted to facts of this case for this reason alone. We now turn to argument of learned senior counsel appearing on behalf of assessee based on Section 2(47)(vi) of Income Tax Act. This Court in Commissioner of Income Tax v. Balbir Singh Maini (2018) 12 SCC 354 adverted to provisions of this sub-Section in following terms: 24. However, High Court has held that Section 2(47)(vi) will not apply for reason that there was no change in membership of society, as contemplated. We are afraid that we cannot agree with High Court on this score. Under Section 2(47)(vi), any transaction which has effect of 9 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) transferring or enabling enjoyment of any immovable property would come within its purview. High Court has not adverted to expression or in any other manner whatsoever in sub-clause (vi), which would show that it is not necessary that transaction refers to membership of cooperative society. We have, therefore, to see whether impugned transaction can fall within this provision. 25. object of Section 2(47)(vi) appears to be to bring within tax net de facto transfer of any immovable property. expression enabling enjoyment of takes color from earlier expression transferring , so that it is clear that any transaction which enables enjoyment of immovable property must be enjoyment as purported owner thereof. idea is to bring within tax net, transactions, where, though title may not be transferred in law, there is, in substance, transfer of title in fact. Given test stated in paragraph 25 of aforesaid judgment, it is clear that expression enabling enjoyment of must take colour from earlier expression transferring , so that it can be stated on facts of case, that de facto transfer of immovable property has, in fact, taken place making it clear that de facto owner s rights stand extinguished. It is clear that as on date of agreement to sell, owner s rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted. Coming to third argument of learned senior counsel on behalf of appellant, what has to be seen is 10 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) compromise deed and as to which pigeonhole such deed can possibly be said to fall under Section 2(47) of Income Tax Act. perusal of compromise deed shows that agreement to sell and Power of Attorney are confirmed, and sum of Rs.50 lakhs is reduced from total consideration of Rs.6.10 crores. Clause 3 of said compromise deed confirms that party of first part, this is appellant, has received sum of Rs.4,68,25,644/- out of agreed sale consideration. Clause 4 records that balance Rs.1.05 crores towards full and final settlement in respect of Agreement entered into would then be paid by 7 post-dated cheques. Clause 5 then states that last two cheques will be presented only upon due receipt of discharge certificate from one M/s. Pioneer Homes. In this context, it is important to advert to finding of ITAT, which was that all cheques mentioned in compromise deed have, in fact, been encashed. This being case, it is clear that assessee s rights in said immovable property were extinguished on receipt of last cheque, as also that compromise deed could be stated to be transaction which had effect of transferring immovable property in question. 11 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) pigeonhole, therefore, that would support orders under appeal would be Section 2(47)(ii) and (vi) of I.T. Act in facts of present case. This being case, we dismiss this appeal but for reasons stated by this judgment. ., J. [ ROHINTON FALI NARIMAN ] ., J. [ ANIRUDDHA BOSE ] ., J. [ V. RAMASUBRAMANIAN ] New Delhi; December 04, 2019. 12 CIVIL APPEAL NO. 9209 OF 2019 (Arising out of SLP (C)No. 34815 of 2012) ITEM NO.4 COURT NO.4 SECTION XII S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No. 34815/2012 (Arising out of impugned final judgment and order dated 25-01-2012 in TC No. 461/2011 passed by High Court of Judicature at Madras) M/S SESHASAYEE STEELS P.LTD. Petitioner(s) VERSUS ASSTT.COMMR.OF I.T, CO. CIR-VI(2)CHENNAI Respondent(s) Date : 04-12-2019 This petition was called on for hearing today. CORAM : HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN HON'BLE MR. JUSTICE ANIRUDDHA BOSE HON'BLE MR. JUSTICE V. RAMASUBRAMANIAN For Petitioner(s) Mr. R. V. Easwar, Sr. Adv. Mr. Rubal Bansal, Adv. Mr. V. Ramasubramanian, AOR Mr. P. Bala Senthil Kumar, Adv. For Respondent(s) Mr. K. Radhakrishnan, Sr. Adv. Ms. Seema Bengani, Adv. Ms. Purnima Bhat Kak, Adv. Mr. Prem Prakash, Adv. Mr. Anas Zaidi, Adv. Mrs. Anil Katiyar, AOR UPON hearing counsel Court made following ORDER Leave granted. appeal stands dismissed in terms of signed reportable judgment. (NIDHI AHUJA) (NISHA TRIPATHI) COURT MASTER (SH) BRANCH OFFICER [Signed reportable judgment is placed on file.] 13 Seshasayee Steels P. Ltd. v. Assistant Commissioner of Income-tax, Company Circle VI(2), Chennai